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The Fed Paused Rate Hikes: Here’s What It Means for Money Market Accounts

The rate-hike time out means that yields for money market accounts (MMAs) will likely hold consistent at the highest rates we’ve seen because 2007. The top MMA rate today is 5.25%.

How Fed Rate Decisions Affect MMA Rates

For the first time in more than a year, the main bank decided not to raise the federal funds rate, holding the key criteria at its existing range of 5% to 5.25%. The fed funds rate shapes the interest rates that are paid by lots of different types of monetary products.

Money market accounts are one example of a banking product whose interest rates are shaped by the reserve bank’s policy decisions. With this type of account, depositors delight in a few of the best qualities of both checking accounts and cost savings accounts.

Cash market accounts typically use higher rate of interest than conventional savings accounts, and might surpass high-yield savings account rates, too. Account holders may be able to compose checks or utilize a debit card attached to the account, normally for a minimal quantity of withdrawals every month.

The very best cash market accounts currently pay an APY of 4.00% or more, and since Wednesday, the leading nationally offered cash market account used a rate of 5.25%. The yields readily available on the very best money market accounts have actually increased over the past year, in line with the interest-rate hikes enacted by the Fed.

What Comes Next for MMAs

Signs that inflation lastly may be cooling and issues that excessively high rate of interest could harm the economy contributed to the decision to stop briefly the hiking cycle in June. Nevertheless, Fed officials suggested that Wednesday’s stop in rate increases will likely be short-lived, with policymakers anticipating that they will raise the fed funds rate by an extra 50 basis points by the end of 2023.

Although Wednesday’s pause did little to tip the scale, the rates on cash market funds vary and most likely to vary based on future advancements in the economy and upcoming Fed policy decisions.

Any additional increase in rates would likely be welcome news for individuals wanting to optimize their savings while delighting in check-writing advantages– qualities that earn money market accounts a good car for those looking to conserve for short-term objectives.

Keep in mind

With Fed authorities recommending that there might be more rate walkings to come this year, there’s a possibility that money market yields might climb up even greater.

Rate Collection Methodology Disclosure

Every service day, Investopedia tracks the rate data of more than 60 banks and credit unions that use money market accounts to consumers nationwide. We identify everyday rankings of the top-paying money accounts. To receive our list, the organization must be federally insured (Federal Deposit Insurance Corp. [FDIC] for banks, National Credit Union Administration [NCUA] for cooperative credit union), and the account’s minimum initial deposit must not go beyond $25,000. The account also should permit check-writing.

Banks and credit unions must be readily available in a minimum of 40 states. And while some cooperative credit union require you to donate to a particular charity or association to become a member if you do not fulfill other eligibility requirements (e.g., you don’t live in a particular area or work in a particular kind of task), we exclude cooperative credit union whose contribution requirement is $40 or more. For more about how we select the best cash market accounts, read our complete approach.


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